21
and in concluding that offsetting forward contracts in foreign
currency constituted capital transactions:
These offsets clearly constitute both "closure" under
section 1233 and a sufficient sale or exchange under the
general capital provisions to mandate capital treatment
here. * * * [Id.]
As use of the term "compensate" was not controlling in
Hoover Co. v. Commissioner, 72 T.C. at 249, use of the term
"cancellation" by petitioners in connection with the settlement
of loss legs of their forward contracts is not controlling and
should not mislead us here.
Respectfully, we believe that the Court of Appeals for the
District of Columbia Circuit in Stoller v. Commissioner, 994 F.2d
855, 856-857, erred in not recognizing the above case authority
and holdings that establish the "closure" or "sale or exchange"
nature of the termination of offsetting forward contracts. Upon
closing by offset of forward contracts, the transaction is
terminated and extinguished, settlement between the parties
occurs at that time, and no contracts remain in effect. This is
illustrated clearly in Appendix A-1 hereto under the caption
"Straddles Opened And Closed -- 1980". The four forward
contracts under this caption were opened on June 20, 1980, and
were settled and closed 10 days later on June 30, 1980, by four
offsetting forward contracts. After June 20, 1980, in spite of
the fact that four offsetting forward contracts were entered into
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